What if you could eat your cake and have it too? If we are being honest, I have always wondered what that really meant. Like, why would you give me a cake if I can’t have it too? Anyway, before we get sidelined by cake (we can have that conversation another day), let’s focus on Hire Purchase.
Hire Purchase, I guess will fit the bill of eating your cake and having it too (you already know how I feel about that statement) as you mostly get to use the product you’re paying for.
In the actual sense of the definition, it is a system by which one pays for a thing in regular instalments while having the use of it. For example, we can define a hire purchase car as you driving the vehicle while making payments on it until its completely paid off.
This may sound similar to leasing a vehicle; however, the significant difference is that one doesn’t become an owner when renting a vehicle; it’s only driven for a time and then returned. With hire purchase, you get to own the car after you complete payments.
Using hire purchase is common in industries where they use expensive or heavy machinery to run daily operational activities. Examples of such industries could include construction, manufacturing, engineering and professional services industry.
They can also use it to finance some other capital requirements of a business, for example cars, phones and photocopiers
Termination of a hire purchase agreement can take any of the following forms
As discussed, hire purchases have their various advantages and disadvantages. It is a financing method that works well as long as you understand all the risks involved.
It is also good to know that financing assets like this is common, as this agreement typically works well for both parties.
If payments can’t be made because of financial hardship, we recommend that communication must prioritize the owner to avoid seizure of property. You can learn more on leasing also here.